US online lending powerhouse SoFi has declared itself a Fico-free zone, ditching traditional credit scores in favour of what it claims are more useful data.
Following a pilot, the San Francisco-based outfit will now decide whether to hand out loans based on three criteria - employment history, track record of meeting financial obligations and monthly cash flow minus expenses.
SoFi, which has funded more than $6 billion in loans and recently closed a record-breaking $1 billion funding round, says that it is the first "large lender" to ditch a Fico model it argues is "flawed and outdated".
"Our approach to underwriting is based on transparency and balancing the needs of our members and investors, and we found that the Fico score was anything but transparent. So we threw it out," says CEO and co-founder Mike Cagney.
"We're proud to be the only major lender that does not use the score for any lending. Instead of relying on a three digit number to tell us who's qualified, we look for applicants who have historically paid their bills on time and make more money than they spend. It's that simple."
Profitable since 2014, SoFi was the first company to enable graduates to consolidate and refinance their federal and private student loans. It has since expanded its offerings to include mortgages, mortgage refinancing, and personal loans.